4 Key Features of Ethereum
This article is part 2 of our series on Ethereum. Bitcoin Blitz #18
Welcome to Part 2 of our series on Ethereum! In Part 1, we talked about what Ethereum is and how it differs from Bitcoin.
If you read Part 1, you might recall that:
Ethereum is the second largest cryptocurrency in the world
Ethereum doesn’t “directly” compete with Bitcoin in the sense that it’s trying to accomplish something different than Bitcoin
Ethereum’s main focus is not to be a payment system (like Bitcoin) and instead to be more of a “marketplace” for a variety of things
Now for Part 2, we’re going to talk about Ethereum’s most important features and what they mean for people like you and me. Let’s begin!
4 Key Features of Ethereum
The key features of Ethereum we’re going to discuss in this article are:
Decentralized finance (DeFi)
Smart contracts
Ether
Open-source blockchain
1. Decentralized Finance (DeFi)
Decentralized finance (DeFi) is one of the “most prominent usages of the Ethereum technology” and it “opens entire areas of banking services to anybody with an internet connection” according to Ethereum’s official website.
DeFi entails people financing with each other minus the intervention of centralized authorities. This financing takes place over the internet.
The “De” is short for “decentralization” and the “Fi” is short for finance. DeFi is said to be an alternative to traditional finance.
The foundation for DeFi is smart contracts, which is our next key feature of Ethereum.
2. Smart Contracts
You may have heard the term “smart contracts” before if you’ve ever dabbled into learning about Ethereum. Smart contracts are an instrumental part of Ethereum’s value proposition.
According to an article by CoinDesk titled, “How Do Ethereum Smart Contracts Work?”, smart contracts “are computer programs that automatically execute transactions if certain conditions are met, without the need of an intermediary.”
The article goes on to explain the value smart contracts provide:
“With conventional contracts, a document outlines the terms of a relationship between two parties, which is enforceable by law. If one Party A violates the terms, Party B can take Party A to court for not complying with the agreement. A smart contract fortifies such agreements in code so the rules are automatically enforced without courts (or any third party) getting involved.”
So smart contracts eliminate the involvement of courts. Ethereum was initially built for creating smart contracts and the “smart contracts introduced by Ethereum are generally considered a fundamental building block for decentralized finance (DeFi) applications” according to Wikipedia.org.
Apparently smart contracting has not gained widespread popularity to date, but advocates proclaim there is a lot of potential behind the technology.
3. Ether
Ether (ETH) is the Ethereum blockchain’s cryptocurrency, much like bitcoin (or BTC) is the cryptocurrency of the Bitcoin blockchain. As we talked about in Part 1 of our series on Ethereum, ETH is the second largest cryptocurrency in the world.
ETH can be used to make payments to someone over the internet and it can also be used for DeFi (mentioned above). Ethereum’s official website states, “You can use your ether as collateral to take out loans or provide liquidity to earn interest on your funds.”
At the time of this writing, ETH’s price is $1,748.
4. Open-Source, Programmable Blockchain
Like we discussed in Part 1 of this series, Ethereum is an open-source blockchain. This means its code is available to the public and developers can access and build upon it. There have been just under 3,000 “projects” built on the Ethereum network to date, according to the official Ethereum website.
A differentiating quality of Ethereum compared to another crypto technology like Bitcoin is that the Ethereum network is highly programmable.
We talked about this in Part 1…this programmability enables developers and creators to build apps and other projects using the blockchain.
Thanks for reading!
Thanks for reading this edition of Cryptostotle! We’ll be wrapping up our Ethereum series next week with Part 3 so stay tuned. We hope you’re learning a lot! We certainly are.